The Shelf company at one stage was a very popular way to go about registering a business in Zimbabwe. In fact, today, we still get many people asking “how to register a shelf company”. Unfortunately, many start-up entrepreneurs have not been told about some of the disadvantages of choosing that sort of formation here in Zimbabwe.
But first, what is a shelf company?
Basically its a company that was registered in the past and is now, for some reason, no longer operating. The business closed down and now, its registration papers are ‘on the shelf’ for sale – ready for the next person to buy.
Here are 3 reasons I don’t recommend Shelf companies…
- A shelf Company Is More Expensive Than The Normal Registration Process. In some cases, FAR more expensive. This is often the case if the company was registered years ago and didn’t trade or closed down a long time ago. In addition to buying the company, you also have the expense of updating it to make it functional again. It’s not uncommon to wind up paying almost double the price.
- A Shelf Company Can Be Terrible for Branding. Having a brand that is appealing and credible in the eyes of your market is a key to your business success. A company name like “Sunnydaysville Trading” maybe available for sale, but that doesn’t mean it’s going to make a great name for your real estate business. Taking the opportunity to choose your own name, a unique, meaningful and effective name is not something to ignore.
- Shelf Companies Can Sometime Cause You Legal Problems. I have heard of cases in which the previous director of what is now a shelf got into trouble and simply vanished, closing down the business. You take ownership of that name only to discover that there is a $10 000 debt waiting for you from a local bank or other. Sure, you might be able to prove your innocence eventually, but why go through the expense and stress of that? Unfortunately, very few consultants who sell shelf companies are going to do thorough background checks for you, and there just isn’t an easy way to do that anyway.
Ultimately, there just isn’t a very compelling reason to buy a shelf company instead of a business from scratch.
“But a shelf company is faster!”. True. And if you’re in a situation in which everyday really does count and the name really isn’t very important to you, then you’re better off buying a pre-done name search. These are name searches that were done and approved, but just never turned into companies. It’s cheap and it can save you a few days in many cases. (We have lots of those for you to choose from by the way).
So there you have it. If you have the choice, go for a brand new company registration. Unless you’re sure of the background of the company you’re buying, you really like the name or the extra money isn’t a problem for you, i would avoid shelf companies altogether.
If you need help with registering a business, use the form below to email, or contact us on WhatsApp 263776774779